What role does innovation play in a company like Anglo American?
"probably loaded against her from the start," and to make efficiency and make the firm more profitable. In making her job even more difficult, she was soon forced to embark the announcement, she asked shareholders for more on a \$2-billion efficiency program involving a number of time to develop the firm's assets and prove its value as an changes guaranteed to rile the old guard of the century-old independent company. "The portfohio changes we hane company. Her whirlwind campaign to cut costs by $450 announced, she argued, "...will position Anglo Ame merican "milion in a 6-month period earned her the nickname were we he identified as being the most attractive." She alieg unimpressed by the savings: Because the entire industry was projected that it would take three years to complete the struggling with high costs during the recession, Carroll's reorganization. cost-cutting was seen as little more than the logical and The central element in the new organization design mass Then, the Swiss-British mining company Xstrata pro- and reorganizing operations into resource-based units, At posedamergerwithAnglo-amovethatwouldcreateas6sbillionfirmtocompetewithindustrygiantslikeBHPintotwoglobalproductdivisions-CoalandFerrousMetale.thetimeoftheannouncementthecompanywasorganized Billiton, Vale, and Rio Tinto. Xstrata said in a statement that each with its own CEO, both of whom reported directly in it was seeking "a merger of equals that would realize sig- the CEO of Anglo American. Below the divisional level were nificant value for both companies' shareholders" and cited Anglo's various global business operations, each dealing "substantial operational synergies" that could amount to with a different commodity (e.g., coal, platinum, iron ore) savings of $1 billion a year in combined costs. From Anglo's and each headed by its own CEO and functional support perspective, there were drawbacks to the deal-its portfolio staff. The CEOs of these units reported directly to the CE0 was worth more than Xstrata's and would be diluted by a of his or her respective division. As a result of what Carroll merger of the two-but the appeal to Anglo shareholders called "simplification and delayering, "these businesses wasclear:Dependingonhowthenewcompanydistributedthecostsavingsamongitsinvestors.Angloshareholderswerereorganizedintoseven"commoditybusinessunits"(BUs),eachofwhichisnow"profitaccountable"thatis stood to realize an increase in the market value of their responsible for its own performance. The major criteria holdings of 26-37 percent. Carroll and the Anglo board quickly rejected Xstrata's The platinum unit, for example, is headquartered in South offer as "totally unacceptable," and in August, Carroll pre- Africa, the copper unit in Chile, and the metallurgical-coal sented both Anglo's mid-year financial results and its argu- unit in Australia. ment for remaining independent. Once again, however, the In addition, Anglo focused BUs only on its core assetsnumbers were underwhelming: Because of the global econ- operations that are essential to producing revenue, cash flow, omy, profits were off 69 percent and revenues 38 percent. or profit. Going hand in hand with the company's delayering Anglo investors wanted to know what management was strategy is thus a strategy to divest its noncore assets: Having doing to deliver the kind of returns promised by the Xstrata already shed its interests in gold and aluminum, Anglo also gest investment bank, announced that "in our view, Anglo zinc as well as a company that manufactures steel products American has not yet presented a strong argument as to why for the construction industry. The decision to delayer and a merger with Xstrata is not strategically sensible and value-_ divest, said Anglo chairman Sir John Parker, "represents an creating for its shareholders." "Frankly," replied Carroll, important step in creating a more streamlined business, with I know what it is that we need to do.... We have enhanced focus on operational effectiveness.... We have a a strategy, we have clear goals, we have tremendous truly world-class portfolio of assets, and these initiatives assets... in the most attractive commodities in the further improve our ability to deliver its full potential." world. The opportunities are massive.... We're well in the three-year window. During the years spent changing aware of what Xstrata does, but I'm very confident of the firm's organization design, Carroll oversaw a number what we can do in the future. Soon thereafter Xstrata withdrew its offer in the face of of employees from more than 162.000 to around 100,000 . resistance from the Anglo board. Anglo, said a company Carroll left Anglo American after she finished implement. spokesman, "can now move forward and run our business ing these massive changes. However, the firm continues to without further distraction." One analyst predicted that alter its design. Two years later, for example, top managers Anglo "will likely show a renewed sense of urgency... announced a new overhaul that would result in three large Anglo "will likely show a renewed sense of urgency .... announced a new overhaul that would result in three large days later Carroll did indeed announce a major overhaul other minerals. No timetable was announced for implemen. of Anglo's organization design intended to other minerals. No timetable was announced for implemenof Anglo's organization design intended to improve tation of this next round of changes, however. t
